I don't buy it. We are still not seeing the full picture here. Interestingly enough, Eagle River originally sent out a notice to Intel and Comcast on October 13th. This was the weekend which Sprint and Softbank (SB) put the final touches on their own agreement. Eagle River has been involved in the overall transaction since the start. Intel and Comcast balked at the initial letter from Eagle River and a subsequent letter was issued on the 17th. I believe this "control" purchase was suppose to take place as part of the Sprint/SB announcement from the beginning. SB wanted some assurances, but had to wait and announce their own deal with Sprint because the media got wind of it.
Since Sprint has been in "control" before, I don't know what exactly how this changes CLWR business plan at the moment. Does SB want to make a run directly for the remaining piece of CLWR, but wanted Sprint to gain as much control to ensure a shareholder vote to approve the deal would happen? I have to think about this one some more... something does not add up based on what we know at the moment and I would not be suprised if CLWR board and management endorsed it in someway.
strawgold - If CLWR were to announce spectrum sale to Dish at ER, don't you think SB would quickly step up to the plate - what are your thoughts about what he would have to do at that time to prevent sale to DISH. I can hardly believe that DISH isn't thinking long term - streaming TV. Perhaps this is the strategic transaction, CLWR has been hinting about.
sweetnothings85 -- the problem is now is that everything at CLWR is in limbo.. think like an employee the anxiety of waiting a couple of days about your future, let alone "6-8 month" before doing anything about it.. if we don't hear anything next week during earnings - this stock is stuck...and if you're long - we're just hoping for that hail mary pass ... i suppose for the longs at this point, think of it as an option as well.. paying a $1.87 and hope to get $2.00+ ...there's a lot of things that need to go wrong with S .. before anyone would be willing to take a shot at CLWR.. in my opinion.. S is doing what it does well.. making a mess of everything and handcuffing all parties invovled.
Sprint had control once and didn't want the liability of clear wire debt, so there certainly is something else afoot, I agree. It ain't over till it's over. The easiest thing to believe in all of this convoluted deal arrangement is that in Sprint's view the shareholder most likely to sway the board should be removed and he had to agree to it before the rest of their strategy can come to fruition. McCaw has other irons in the fire right now and he may be in the mood to move on if he needs the money to pursue his other venture. It takes money occasionally even for billionaires if they have something else they want to accomplish more. With ERH gone, and a Sprint board in place, another deal waiting in the wings could be accomplished faster, too. Dish networks has largely been forgotten in the conversations, but they bough a big chunk of somebody's debt right in the same July time frame, it's a SEC filing, and they are far from out of the picture, in my opinion. In fact, ERH leaving might be part of Dish's own requirements before they sign anything, which could pressure ERH if they do want out. If that happens - and it's a big IF - it's a coup for Hesse, no doubt; it will be one the biggest deals of the decade and maybe beyond. Right now though, we smaller shareholders are holding the bag. What else is new. OPINION ONLY.
strawgold - also, clwr filed a private SEC filing about a week before DISH's private SEC filing. A few people noticed it, but not much weight given. DISH would be perfect for equation. Like your thoughts.
"As we noted before, Sprint would be wise to take control of Clearwire sooner rather than later to accelerate deployment and prevent any interlopers rather than just building up extra insurance," wrote BTIG analyst Walter Piecyk. "Their purchase of Eagle River helps in a competitive bid for Clearwire, but a deal like that would have been difficult anyway given Sprint's existing board seats and the size of Clearwire. The reality is that if Verizon bid $6 for Clearwire and Clearwire's board of directors did not act in their fiduciary duty to accept the offer, it would end up in the courts. More importantly, according to Sprint CFO Joe Euteneuer, there does not appear to be a way for Sprint to block a spectrum sale by Clearwire to Dish or AT&T despite the incremental purchase of Eagle River."
Excerpt from: Softbank doesn't rule out possibility of a MetroPCS deal
Clearwire's status remains in flux as deals swirl
October 19, 2012 | By Phil Goldstein
Can one of you chumps explain how Sprint benefits from purchasing the stub in CLWR when they effectively have control over the company whenever they want it?
Also, now that McCaw is gone, they're the only investor who have a vested interested in running the company.
If you have control over the entire thing, why would you pay mindless idiots $1.5b for ... nothing?
As a publicly traded company, the board, by law, has to act in the best interests of ALL shareholders, not just one. Or go to jail. If Sprint buys Clear then they can rape and pillage as needed in the best interests of ALL Sprint shareholders and not just SB's 70%. With your logic, why would anyone buy Sprint Stock when SB can rape Sprint to make SB look better?
To save $500 millon a year in duplicative management and network services. To eliminate the need to negotiate with a semi-indepent company every time you want to use the spectrum. To have all you can eat TD-LTE and WiMax instead of paying per gigabyte. To own all the spectrum, and be able to sell off unneed chunks, when it becomes much more valuable in a couple years as the primary global roaming frequency.
Thanks For the write up. In all my years of Wall Street it has been a long time since I've seen such a messy transaction like this. McCaw is only taking care of himself. He has a call option with no expiration date and doesn't give a crap about the company or shareholders. S now has control and can do what it wants without a proxy fight but even with the previous ownership, a proxy battle would have been unlikely. So the purchase of McCaw stake here is a bit odd. Back in June S relinquished majority control going from 54% to 49% - at the time it was thought to avoid any financial obligation in case of CLWR default. So certainly yes, a full buyout seems inevitable... but right now it's hard to imagine it being for more than $2.00 per share - and as long #$%$ has majority control - another party going to have to give one heck of a bid to wrestle it away...
Perhaps many on the board have seen it but it worth posting it.
Clearwire Is Sought by Sprint for Spectrum
By MICHAEL J. DE LA MERCED
Craig McCaw, founder of Clearwire, in 2006.Ken Lambert/The Seattle Times, via Associated PressCraig McCaw, founder of Clearwire, in 2006.
Sprint Nextel has moved to protect one of its most valuable assets — access to a big chunk of spectrum — just as it is preparing to become a more aggressive force in wireless, with the backing of SoftBank of Japan.
The company, the No. 3 cellphone provider in the United States, disclosed on Thursday that it had offered to buy a stake in Clearwire from its founder, Craig O. McCaw, the cellphone pioneer, effectively giving it majority control of the struggling broadband company.
Sprint already relies on Clearwire to handle data demands for some of its customers, and the smaller network’s big block of wireless spectrum could be useful in building out its own next-generation cellphone network.
“We believe it is a strong signal that Clearwire’s future could likely be increasingly aligned with Sprint’s strategy,” Michael Rollins, an analyst with Citigroup, wrote in a note to investors.
Sprint and SoftBank announced on Monday a deal that involves the Japanese telecommunications giant buying a 70 percent stake for $20.1 billion as well as providing an immediate cash infusion into Sprint.
While the Clearwire maneuver is not directly connected to that deal, it is a signal of intent from the American cellphone company, whose recent ambitions to challenge the market leaders Verizon Wireless and AT&T have been limited by a debt-laden balance sheet.
Sprint has already been converting much of its existing infrastructure into a Long Term Evolution network, which uses a faster data technology used by the newest smartphones.
A portion of Clearwire’s spectrum, which is similar to the radio band that SoftBank uses, could eventually be turned into an LTE highway for devices that work on the networks of both Sprint and its Japanese partner.
While the agreement with Mr. McCaw appeared to come together with surprising speed, Daniel R. Hesse, Sprint’s chief executive, said in an interview on Thursday that his company had already made it known to its partners in the company, which include Intel and Comcast, that it would be interested in buying their stakes if they were willing to sell.
Sprint already owns more than 48 percent of Clearwire, but the agreement with Mr. McCaw’s investment vehicle, Eagle River Holdings, buying class A and class B shares from it for $100 million, will push that stake to more than 50 percent. Under the terms of agreements among the Clearwire investors, Eagle River must offer the other companies the right to buy into a portion of its shares.
Both Intel and Comcast have received that offer, giving them 30 days to decide.
Perhaps the most important aspect of the agreement with Mr. McCaw, from Sprint’s perspective, is that the board seat held by Eagle River would be filled by Clearwire, adding a third independent director on the 13-member board.
Sprint would still control seven board seats. But having more independent voices could keep Clearwire more aligned with the network operator’s interests. Other strategic investors in Clearwire have also named directors. Agreements among the strategic investors require that certain important business decisions be approved by 10 of Clearwire’s 13 directors.
“Sprint would sleep better at night knowing that the board was still controlled by Clearwire,” said Craig Moffett, an analyst with Sanford C. Bernstein.
Shares of Clearwire tumbled 10.18 percent on Thursday, to $2.03, as investors’ hopes for a more conventional takeover were dashed.
Mr. Hesse stressed that the Eagle River transaction was not required for the closing of the SoftBank deal, and that he was not currently planning to further change Clearwire’s governance.“Our interest is aligned with the public’s,” he said.
But Mr. Hesse acknowledged that his company had previously been constrained in the strategic moves that it could make because of its heavy debt load and limited cash. “It’s been very tough sledding for us because we have been the poor kid on the block,” he said. “We have seen a number of opportunities pass us by over the years.”
Last month, Time Warner Cable said it planned to sell its 7.8 percent interest in Clearwire. Sprint passed on buying that stake at the time, but Mr. Moffett said that the company would have loved to have reached a deal if possible.
Mr. Hesse may now be feeling emboldened after having struck the deal with SoftBank. The Japanese company plans to inject $8 billion directly into Sprint as part of its effort to take control of the American carrier, which can be used for corporate moves like acquisitions.
It isn’t clear whether — or when — Sprint will try to buy out its remaining partners in Clearwire, though a person close to one of the other strategic investors said that any decision would ultimately come down to the price.
Neither Mr. Hesse nor Masayoshi Son, the founder and chief executive of SoftBank, would comment on other moves, including potential takeovers. People briefed on the matter have said that Sprint had considered bidding for MetroPCS, a smaller American cellphone service provider that plans to merge with T-Mobile USA.
Mr. Son has intimated that he envisions Sprint as a potential vehicle to buy other service providers. The enlarged T-Mobile has been suggested as a possible target. In an interview on Thursday, he emphasized that his ambition is to create one of the world’s biggest mobile Internet companies.
And Mr. Hesse said on Thursday that he still anticipated being a part of the deal-making in the American cellphone service industry.
“This is a scale game,“ he said, adding that he believes regulators would favor transactions that fortified competitors to Verizon Wireless and AT&T, which currently tower over the rest of the industry.
But first their transaction must pass muster with American regulators, including the Justice Department and the Federal Communications Commission. It must also be reviewed by the Committee on Foreign Investment in the United States a government panel that determines whether a deal would pose a threat to national security.
Neither Mr. Hesse nor Mr. Son said that they expect any problems with the committee review, and that they have not heard from any legislators regarding potential issues with Sprint having a foreign owner.
And while a joint venture of SoftBank obtains network equipment from Huawei and ZTE, two Chinese telecommunications equipment makers criticized by the House Intelligence Committee earlier this week as being threats to national security, Mr. Son said that he is mindful of keeping the American government happy.
He said that Huawei and ZTE currently supply only a small part of his company’s total equipment, and that he is mindful of the multiple government agencies that currently have contracts with Sprint. “We will respect whatever the American government wants,” he said.
Comments are welcome.
Looks like the press got it wrong again. I did a little research and two years ago (when Hesse and two other Sprint officers resigned from the board due to anti-trust concerns) Sprint had 54% ownership and 7 directors on a board of 13. Last Spring at the shareholder's meeting Sprint nominated 7 of 12 board seats. In the Equityholders agreement Sprint only gets to nominate 7 (or less) to the board. (New York Times article just published gets it right)
So Sprint going from 48% to 53% voting rights doesn't change anything regarding the board. What Sprint is really buying is McCaws veto power in exchange for the make good clause. And it won't really make any difference if Comcast and Intel decided to pick up some of McCaws shares.
I want what McCaws having! Imagine being able to sell your entire postion now for $3 a share and invest the proceeds elsewhere. And knowing that when Sprint makes a buyout offer for Clearwire, that will probably be much higher to convince the holdouts, that you will be receive the balance as if you kept your shares.
The real positive hear is that Sprint wants Clearwire bad enough to take responsibility for it's debt again. And I see the $3 billion from Softbank going towards a bigger TD-LTE network and/or paying off some of Clearwire's debt.
Good for the bond holders. Irrelevant to stockholders.
Sprint owns the company at a $10m valuation for the equity the same as they do at a $4b valuation. It's not in their best interest to pay up, and the stub-holders have no way of casting a dissenting vote. The paper is essentially worthless to all concerned.
Wall Street Journal: "Gaining the Class B shares would give Sprint a 50.4% voting interest in Clearwire, according to the filing." - Wrong on so many levels it's pathetic.
The filing clearly states Sprint currently has 50.8% of Class A common stock and 48.1% voting rights. And McCaw/Eagle River has 5.0% of Class A and 4.6% voting rights. So if Sprint buys all of McCaws shares they will have 52.7% voting rights.
If Intel, Comcast, and Brighthouse offered to buy all of McCaw's shares as well, they would have to split them based on current percentage ownership. So Sprint would still get around 3/4 of the shares and end up with at least 51% voting rights. But that alone doesn't get Sprint anymore control than they have now.
Intel and Comcast aren't likely to buy McCaw's shares, because if they did they would also have to honor the "make whole clause" set forth in the offer, and it wouldn't buy them anymore control.
The only real change in control is that McCaw's board nomination will now be made by Clearwire and McCaw will no longer have veto power over a buyout or other major change in control. It could be argued Sprint hasn't gained anything other than a few shares. However, if Sprint and Clearwire are in agreement on something, they now have a combined 10 votes of 13 giving them the power to overrule Intel and Comcast on board decisions such as:
1) the acquisition or disposition of, or the entry into a joint venture involving the contribution by Clearwire or any of its subsidiaries of, assets with a book value in excess of 20% of the consolidated book value of the assets of Clearwire
2) any change of control of Clearwire or any of its subsidiaries;
Because of the "make whole" clause and associated "share exchange" clause, McCaw hasn't really sold out for $3, but instead for whatever Clearwire is eventually bought out for. He has given a huge endorsement that Clearwire and Sprint are working together in his interest, and that the merger with Softbank is so positive he is willing to give up control (as long as he gets the buyout price later).
And Sprint has essentially stated they will pay $3 or more for Clearwire shares. When the market realizes this I think the share price will move in that direction. I expect Comcast/Brighthouse to divest because of their conflict of interest, leaving Intel as the soul veto power over a bad deal.
The last time Clearwire sold for around $5 a share, they were just finishing up WiMax and had no concrete plans for LTE, lightsquared was going strong and had approval for it's network, Verizon was rolling out LTE big-time, and clearwire had 8 months of liquidity available.
The prospects for this company are much better now than they were at that time, yet the stock is barely 40% of the value it was at that time... even as the demand for wireless capacity has been outstripping supply at a torrid rate industrywide.
I'd even add that the market value of clearwire's spectrum has likely appreciated at a faster clip than the company's rate of cash burn.
The best indication of my contention? Simply the fact that there's big interest in clearwire from softbank now whereas there wasn't 18 months ago.
This isn't over. We have what they want... they're just too strapped with Network Vision right now to do more than buy McCaw's position with the "make whole" guarantee and they won't be so strapped when the $8 billion arrives along with softbank's un-diminished infatuation with clearwire's spectrum.
Don't let the day traders take your eye off of just exactly what value is... and what value isn't.
So, let's connect some dots... Ask yourself why the SB deal was leaked? Why haven't we heard anything from the CLWR BOD? There is also that little shelf offering just sitting there for a reason. There is also the $300M of debt bot under a veil of secrecy. CLWR also said they were working on a strategic move to be announced soon.
IMO, the CLWR side leaked the deal. There is a war going on between S & CLWR. IMO, the SB deal was leaked early to force Hesse's hand and to flush out those on the sidelines who are also interested in CLWR's spectrum.
I think there were unexpected players that wanted CLWR's spectrum at a higher price. Who does that benefit? A higher price for spectrum Sprint probably said nobody wanted. That changed the SB deal that Hesse worked out with SB. So, S had to go to McCaw and pay him for time... The bubbles have surfaced but the submarine is still hiding under the water and nobody knows where it will surface...
Thanks C Wire - nice to some intelligent posting. However I am concerned:- what is to prevent S from forcing CLWR to issue significant more shares and diluting the remaining public shareholders. This will drive down the price of CLWR shares which S can pick up cheap. The shares could even be paid for by taking over some of the CLWR debt which they would refinance at cheaper rates. So the spectrum would remain in CLWR, admittedly CLWR would have less debt, but S would own more of CLWR. In addition CLWR is very dependent on S for cash flow/revenue - so if they pay a lower rate for the spectrum it just drives down the value of CLWR shares - thoughts??
No I don't think S can do that because CLWR were clear about releasing more shares at current stock prices. if S decide to go with it that will generate tons of LAW SUITS.